Over the last few weeks, we have seen an unprecedented level of contagion spreading through the cryptomarket with major platforms and funds, seemingly blocking withdrawals or even filing bankruptcy. Just taking a look at some of the biggest players — Celsius, BlockFi, and Voyager — let’s take a look at a quick timeline…
June 12th, 2022 — Alex Mashinsky, founder and CEO of Celsius tweets indicating that there’s no problems with Celsius, and accuses of other spreading FUD:
June 13th, 2022: Celsius sends a memo to its users that they are freezing all withdrawals:
June 13th, 2022: To reassure users, BlockFi tweets that everything is operating normally:
June 14th, 2022: Voyager gives out a press release indicating that they are “well capitalized and in a good position to weather this market cycle and protect customer assets.
June 17th, 2022: Voyager gives out another press release reporting that they signed term sheets for a $200 million and 15,000 $BTC line of credit with Alameda Research.
June 21st, 2022: BlockFI tweets announcing that they too, have secured a $250 revolving credit loan with FTX:
July 1st, 2022: Voyager gives out notice to it’s users that trading, deposits, withdrawals, and loyalty rewards were being temporarily suspended:
The Contagion is real, but the FUD might not be…Or could it be?
So following many different CeFi and crypto exchange platforms on twitter and discord, the contagion is definitely happening, or at least the FUD around the contagion is definitely happening. Perhaps every single platform is now being asked for more transparency, where people are asking more questions about how/if they are leveraged, whether or not funds are involved with algo-stables, or in other words basically how the platform’s yields are being generated and how degen are those methods in order to obtain high yields.
What’s compounded the level of current FUD is the quick turnaround in information where people are being told one day to spreading FUD about blocking withdrawals (as in the case of Mashinsky), and then literally barely a day later…freezing all withdrawals. Do I believe Mashinsky’s intentions were to lie to its investors? No. In fact, looking at $ETH during his heated twitter exchange, it appears the real reason why Celsius closed its withdrawals is because the price action was doing this:
Do I believe that he is fighting like hell for his company and its users? Yes. However people’s intention don’t necessarily equate to trust, and what’s happened in these situations have led people to lose faith, even if it’s due to forces out of anyone’s control, like $ETH going on a -40% downturn in less than 48 hours.
Is KUCOIN next?
As recent as July 2nd, several different prominent crypto influencers were sounding alarms that KuCoin was possibly insolvent and that people should be withdrawing their funds:
Why were the alarms going off? Primarily because of this tweet:
With such a large liquidity drain, people immediately assumed that this was signaling a bank run, but in fact, this was later confirmed to be a KuCoin-to-Kucoin wallet transfer:
This run of events (which transpired in the span of less than 24 hours) led a chain reaction of many people trying to withdraw all their funds from KuCoin at the same time, only to face a wall of extended wait times and network congestion…which ultimately lead to more FUD.
So where does KuCoin stand now?
Obviously no one can tell how things will play out in the long run, but as it stands at time of writing, KuCoin never blocked withdrawals and as far as I can tell, there is no substantiated facts at them being insolvent. KuCoin’s CEO and founder Johnny Lyu also tweeted:
In fact, the only credible information I could find shows quite differently how KuCoin is doing — just last month through their pre-Series B funding round, they were able to raise $150 million, bringing their total valuation to $10 billion. (To put things in perspective, during their 2018 Series A funding they had raised $20 million.) In addition to an increased valuation, KuCoin publicly announced the July 1st/2nd FUD and June 12th Celsius contagion started spreading that despite the market crashing they were still expanding and hiring:
I personally take it as a very good sign that they’re able to increase their workforce in a bear market, when many other platforms (i.e., ) are significantly reducing theirs.
Is KuCoin safe?
First let’s zoom out a bit here. Back in September 2020, Kucoin experienced one of the largest hacks on record, losing an estimated $280 million. The response? Due to their quick and calculated response, they were able to recover approximately “84% of the stolen funds, and covered the remaining part with [their] own funds, resulting in no user suffering any loss in the incident.
Comparing this to other major security breaches and hacks, KuCoin never really missed a beat, and it’s no wonder that its gained so much in popularity, placing it currently in the top 5 cryptocurrency spot exchanges. Furthermore, KuCoin has promised to become more transparent with their soon-to-be-published 2022 H1 review report:
These are all positive signs, and something that builds trust and confidence. But like I mentioned earlier, the skeptical side of me tells me that we’ve heard this story before (i.e., BlockFi, Voyager, Celsius) and of course there’s always a possibility that the narrative could change quickly.
One more thing to mention from my personal experiences with KuCoin — if you’ve followed my previous , back in December I made a newbie mistake on KuCoin of trying to make a USDC deposit via polygon rather than ERC20. The error, resulted in my funds going into the dreaded no man’s land of crypto. Initially freaking out because I had heard multiple horror stories of people unable to recover thousands of dollars of erroneous transfers, after a quick chat with KuCoin’s customer service, I was greatly relieved to be able to eventually get my funds back into my wallet. Instead of paying the price to learn from a common mistake in the world of crypto, KuCoin bailed me out and gave me a refund. To me, this only gave me more respect to KuCoin’s business practices, and I imagine that victims of the 2020 hack felt the same way.
TLDR, Key Takeaways
I too, was alarmed when reading different tweets which circulated some of the FUD surrounding KuCoin, but digging a little further it was pretty clear that the rumors were unfounded. KuCoin has responded quickly and decisively and it appears that they have been since its inception.
Is it possible for KuCoin could go down? With the perfect storm, of course it is, but you could fundamentally say that about any centralized exchange. Is there any indication that it will in the immediate future? I would argue no, and if you have any evidence against the contrary I would be very interested in hearing about it. All the information I could find in fact points to the opposite, that KuCoin is growing, and is in fact growing out rapidly.
Interested in trying out KuCoin yourself? Considering supporting me and this blog by using my referral code: . I’ve written articles about KuCoin before, and they have many cool features such as co-opted mining, trading bots, and a new Learn and Earn program. If you take a look at their announcements, page, there are constantly new things coming out with new competitions, promotions, listings, and earning opportunities.
As always, thanks for reading and be sure to follow me on twitter to receive all my latest updates: https://twitter.com/CryptosWith
